Markets rebound as Brexit anxiety recedes
US stock indexes mounted a broad comeback on Tuesday as investors set aside their anxiety over Britain's vote to leave the European Union (EU) and snapped up shares following a two-day rout.
Encouraging data on the US economy and housing market helped put traders in a buying mood.
The broad rally followed even bigger gains in Europe, which also bounced back from the steep losses triggered by Britain's 'leave' vote last Thursday.
Oil and gas companies led the rally as energy prices rose. Banks and other financial companies, which took the heaviest losses in the sell-off, also surged.
Bond prices fell, sending yields higher. The yield on the 10-year Treasury note rose to 1.46 per cent from 1.44 late Monday.
"We were due for a bounce heading into the morning; we had a couple of tough days there," said Sean Lynch, co-head of global equity strategy at Wells Fargo Investment Institute. "Investors are stepping up and seeing some areas that may have been oversold the past couple of days and redeploying some of their cash."
The Dow Jones industrial average gained 269.48 points, or 1.6 per cent, to 17,409.72. The Standard & Poor's 500 index rose 35.55 points, or 1.8 per cent, to 2,036.09. The Nasdaq composite added 97.42 points, or 2.1 per cent, to 4,691.87.
Despite the rebound, the three indexes remain on track to end June in the red. They are also down for the year.
European benchmarks had an even better day than US indexes. Britain's FTSE 100 and France's CAC 40 each gained 2.6 per cent. Germany's DAX added 1.9 per cent.
The euro and the British pound recovered somewhat, though the pound remained near the 30-year lows it plunged to immediately following the leave vote.
In currency markets, the pound recovered to US$1.3343 from US$1.3176 on Monday. The yen eased slightly against the dollar, though it was still hovering near its strongest level in two years. The dollar rose to 102.79 yen from 101.97 yen. The euro strengthened to US$1.1049 from US$1.1005.
Benchmark US crude rose US$1.52, or 3.3 per cent, to close at US$47.85 a barrel in New York. Brent crude, used to price international oils, gained US$1.42, or 3 per cent, to close at US$48.58 a barrel in London.
Natural gas gained 20 cents, or 7.4 per cent, to US$2.92 per 1,000 cubic feet.
Uncertainty and anxiety over the economic fallout from Britain's vote to leave the European Union had roiled global financial markets since Friday and prompted ratings agencies to slash their top-shelf credit rating for the UK.
Investors appeared to shake off their some of their jitters Tuesday. British Prime Minister David Cameron signalled that he might not trigger a clause setting in motion the UK's exit from the EU before October.
Earlier in Asia, markets bounced back from early losses as leaders signalled that they were ready to step in with support policies. Japan's benchmark Nikkei 225 index climbed 0.1 per cent, while South Korea's Kospi added 0.5 per cent.
Hong Kong's Hang Seng Index was a laggard, losing 0.3 per cent. It was dragged down by companies with high exposure to Europe, such as billionaire tycoon's Li Ka-shing's CK Hutchison Holdings, which has British retail, ports and telecom investments and fell 1.7 per cent.
In the US, Commerce Department raised its estimate of US economic growth in the first three months of the year. Separately, a key gauge of home values showed US home prices climbed in April, hitting record highs in several cities. In addition, the Conference Board said its measure of that US consumer confidence increased this month to the highest level since October.
"Obviously, the market isn't very receptive to uncertainty, but in some ways, this uncertainty is providing the possibility and the consideration that what happened in the UK isn't necessarily reflective of, or an indicator of, a recession, especially here in the US, as well as globally," said W. Janet Dougherty, a global investment specialist at J.P. Morgan Private Bank.